unit 9 Flashcards
What happens at the title closing?
The buyer completes financing arrangements (referred to as closing the loan).
The seller transfers the title.
Both the buyer and seller pay the necessary taxes, fees, and other charges.
What is the most important document at closing and why?
The deed is the most important document because it transfers the property to the purchaser.
Define the term marketable title.
A marketable title is one that is so free of defects that the buyer is certain they will not have to defend the title.
What is an abstract of title?
A written, chronological summary of the property’s title records and other public records affecting rights and interests in the property. It includes the property’s chain of title and all current recorded liens and encumbrances, by date of filing.
What does a title search reveal?
The legal description of the property.
The owners of record.
Any outstanding liens or encumbrances on the property.
Who needs title insurance and why?
Both the buyer and the lender need title insurance. Insurance for the buyer ensures a clear title and protects the investment. Insurance for the lender protects the lender’s interest in the property.
What is escrow?
The process in which a disinterested third party holds all money and documents relating to a transaction until all of the terms and conditions of the escrow instructions have been satisfied.
List three activities that take place during the escrow period.
Getting an appraisal.
Ordering pest control and other inspection reports.
Obtaining property insurance.
Gary carries an insurance policy that equals 60% of the replacement value of his home. He suffers $8,000 in damage on his home after a windstorm. How will his insurance claim be handled?
It will probably be prorated as follows to give him $6,000:
60% ÷ 80% = 75% x $8,000 = $6,000
What factors determine whether a company will issue an insurance policy on a property and what premium the company will charge?
Current condition of the property
Claim history on that property
Owner’s claim history
Owner’s credit history
What does RESPA require lenders to give to borrowers?
The correct figures pertaining to their closing costs.
RESPA does not apply to what kinds of loans?
Seller-financed loans or loan assumptions (unless the lender has changed the terms of the assumed loan or charges more than $50 for the assumption).
List three items that a buyer usually pays at closing.
Credit fees
Loan origination
Homeowner’s insurance
If an item is paid for in advance by the seller, how will it be handled on the settlement statement?
The buyer will receive a debit and the seller will receive a credit.
What do you call those items that the seller has incurred but have not been paid and how will they be handled on the settlement statement?
These items are paid in arrears. The buyer will get a credit and the seller will get a debit.
Sally and Sam have sold their home to Tina and Max. The closing is set for August 23. The insurance policy of $1,700 was prepaid. Using the 12-month/30-day method, what will be Tina and Max’s share of the insurance expense and how will it be handled on the settlement statement?
$1,700 ÷ 12 = $141.67
$141.67 ÷ 30 = $4.72
Seller: $141.67 x 7 = $991.69 (accounts for January through July)
$4.72 x 23 = $108.56
$991.69 + $108.56 = $1,100.25
Buyer: $1,700 - $1,100.25 = $599.75.
Where in the Closing Disclosure will you find the items that are to be prorated between the buyer and seller, at closing?
Page 3, Items K, L, M and N.
Where on the Closing Disclosure would you find information about the real estate broker’s commission?
On page 2, section H, Other
What is important about the last line on page 3 of the disclosure?
This line shows the amount of money the buyer needs to bring to closing as well as the amount of money the seller will receive at closing.
